Gardner Energy Corporation Baja Energy, LLC., Pandale Land & Minerals Company LLC., Hedberg Family Limited Partnership and Pescador Partners, Ltd v. McNeil, McNeil, & Holt, Billy McNeil and Jeanne Holt, Both Individually and as Executors of the Estate of Glenda McNeil, Jimmy McNeil Cattle Company, and Westway Ranches, LLC

Court of Appeals of Texas·Decided December 27, 2023·No. 08-23-00140-CV·Published

Opinion

COURT OF APPEALS

EIGHTH DISTRICT OF TEXAS

EL PASO, TEXAS

§

GARDNER ENERGY CORPORATION; BAJA ENERGY, § LLC, PANDALE LAND & MINERALS COMPANY LLC, § No. 08-23-00140-CV HEDBERG FAMILY LIMITED PARTNERSHIP, and PESCADOR § Appeal from the PARTNERS, LTD., § 143rd Judicial District Court Appellants,

§ of Reeves County, Texas v.

§ (TC#21-08-24090-CVR)

McNEIL, McNEIL, & HOLT, BILLY McNEIL and JEANNE § HOLT, both individually and as Executors of the Estate of § GLENDA McNEIL, Deceased, JIMMY McNEIL CATTLE § COMPANY, and WESTWAY RANCHES, LLC, § Appellees. §

MEMORANDUM OPINION

Appellants and Appellees each own an undivided 1/2 mineral interest in certain Reeves County property burdened by the State’s 1/16th non-participating royalty interest. In ruling on the parties’ cross-motions for summary judgment, the trial court found that only the Appellants were

to bear the burden of the State’s interest based on its construction of a 1976 mineral deed. We conclude, however, that the language in the deed indicates the burden of the State’s interest is to be shared proportionately by all of the mineral interest owners. We therefore reverse the trial court’s order and remand for further proceedings as explained below.

FACTUAL AND PROCEDURAL BACKGROUND A. The mineral interests In 1951, the State of Texas conveyed the subject property (the Property) by “patent” to Earl Ellis, with the State reserving a 1/16th non-participating royalty interest (NPRI) in case of production on the Property. 1 In 1964, L.D. McNeil became the successor-in-interest to Ellis’s ownership interest in the Property. The parties agree that each of the deeds in McNeil’s chain of title indicated the conveyances were subject to the State’s 1/16th NPRI.

In 1976, L.D. McNeil and his wife (the Grantors) conveyed by mineral deed an undivided 1/2 mineral interest in the Property to Jimmy Don McNeil, Floyd McNeil, and William C. McNeil (the McNeil Grantees), while retaining a 1/2 mineral interest in the Property (the Deed). Through additional transactions, Appellants (the Gardner Group) became the successors-in-interest to the Grantors’ retained undivided 1/2 mineral interest in the Property, and the Appellees (the McNeil Group) became the successors-in-interest to the undivided 1/2 mineral interest the Grantors conveyed to the McNeil Grantees.

Appellants and Appellees have executed oil and gas leases on the Property, which call for them to be paid 1/4th of the proceeds from production as their royalty interest. The parties agree the State’s NPRI entitles it to a 1/16th share of proceeds from the production, and the State’s share

1 The State’s NPRI exists because the subject property was originally on public school lands owned by the State of Texas. The State Legislature, through the 1931 Sales Act, required the State to reserve a 1/16th non-participating royalty interest when selling any portions of such lands. See Wintermann v. McDonald, 102 S.W.2d 167, 173 (Tex. 1937) (discussing Act’s requirements).

was allocated between the two groups in accordance with their proportionate interests until 2018. However, in 2018, one of the lessees requested a new title opinion, which stated that 100% of the State’s NPRI should be allocated against the Gardner Group’s share of lease royalties from production, with none allocated against the McNeil Group’s share. Since then, the entire burden of the State’s NPRI has been allocated against the Gardner Group’s royalty interest.

B. The Gardner Group’s lawsuit On August 16, 2021, the Gardner Group filed a lawsuit against the McNeil Group seeking a declaratory judgment that the burden of the State’s NPRI is to be borne by both groups’ share of production in proportion to their respective interests. The Gardner Group also sought damages for “Money Had and Received and/or Unjust Enrichment” for the allegedly erroneous apportionment of the State’s NPRI since 2018. The McNeil Group denied the allegations.

The Gardner Group thereafter filed a motion for partial summary judgment, seeking a declaratory judgment that the State’s NPRI was to be “borne by all mineral owners proportionate to their respective mineral interests.” In its motion, the Gardner Group argued the Deed, while not expressly referring to the State’s NPRI, reflected the Grantors’ intent that the burden of the State’s NPRI was to be allocated proportionately between the Grantors’ reserved 1/2 mineral interest and the 1/2 interest they conveyed to the McNeil Grantees. The McNeil Group opposed the motion and filed a cross-motion for summary judgment, arguing that because the Deed did not expressly refer to the State’s NPRI, the conveyance to the McNeil Grantees “was not made subject to the State[’s] NPRI.” The McNeil Group argued the burden remained entirely with the Grantors’ 1/2 reserved interest, which is now owned by the Gardner Group, and therefore, only the Gardner Group’s interest is burdened by the State’s NPRI. The McNeil Group sought dismissal of the lawsuit in its entirety.

Following a hearing and supplemental briefing, the trial court issued a final judgment in favor of the McNeil Group, finding that the McNeil Group “shall bear no portion of the burden of the State of Texas’s 1/16th non-participating royalty interest in the Property (the “State NPRI”), and that the burden of the State NPRI shall be apportioned to [the Gardner Group] and their respective heirs, executors, successors and assigns.” The trial court ruled that the Gardner Group take nothing and dismissed the lawsuit with prejudice. This appeal followed.

ISSUE ON APPEAL

On appeal, the Gardner Group contends the trial court erred in denying its partial motion for summary judgment and in granting the McNeil Group’s cross-motion. At issue is the interpretation of the Deed and whether the Grantors intended to convey the proportionate burden of the State’s NPRI to the McNeil Grantees or whether they intended the entire burden to be allocated to their reserved 1/2 interest. As explained below, we conclude the Deed allocates the burden of the State’s NPRI proportionately to both parties and their successors, and the trial court therefore erred in granting summary judgment in favor of the McNeil Group.

STANDARD OF REVIEW

We review the grant of a motion for summary judgment de novo. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013). When, as here, opposing parties file cross summary judgment motions on the same issues and the trial court grants one motion and denies the other, we consider the summary judgment evidence presented by both sides, determine all questions of law presented, and if we determine that the trial court erred, we render the judgment the trial court should have rendered. Id. at 248.

Free access — add to your briefcase to read the full text and ask questions with AI

Gardner Energy Corporation Baja Energy, LLC., Pandale Land & Minerals Company LLC., Hedberg Family Limited Partnership and Pescador Partners, Ltd v. McNeil, McNeil, & Holt, Billy McNeil and Jeanne Holt, Both Individually and as Executors of the Estate of Glenda McNeil, Jimmy McNeil Cattle Company, and Westway Ranches, LLC, (Tex. Ct. App. 2023).

Gardner Energy Corporation Baja Energy, LLC., Pandale Land & Minerals Company LLC., Hedberg Family Limited Partnership and Pescador Partners, Ltd v. McNeil, McNeil, & Holt, Billy McNeil and Jeanne Holt, Both Individually and as Executors of the Estate of Glenda McNeil, Jimmy McNeil Cattle Company, and Westway Ranches, LLC (Gardner Energy Corporation Baja Energy, LLC., Pandale Land & Minerals Company LLC., Hedberg Family Limited Partnership and Pescador Partners, Ltd v. McNeil, McNeil, & Holt, Billy McNeil and Jeanne Holt, Both Individually and as Executors of the Estate of Glenda McNeil, Jimmy McNeil Cattle Company, and Westway Ranches, LLC) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

Related

Stewman Ranch, Inc. v. Double M. Ranch, Ltd.
192 S.W.3d 808 (Court of Appeals of Texas, 2006)
Luckel v. White
819 S.W.2d 459 (Texas Supreme Court, 1992)
Pich v. Lankford
302 S.W.2d 645 (Texas Supreme Court, 1957)
Wright v. E.P. Operating Ltd. Partnership
978 S.W.2d 684 (Court of Appeals of Texas, 1998)
Woods v. Sims
273 S.W.2d 617 (Texas Supreme Court, 1954)
Benge v. Scharbauer
259 S.W.2d 166 (Texas Supreme Court, 1953)
Anadarko Petroleum Corp. v. Thompson
94 S.W.3d 550 (Texas Supreme Court, 2003)
Westland Oil Development Corp. v. Gulf Oil Corp.
637 S.W.2d 903 (Texas Supreme Court, 1982)
Selman v. Bristow
402 S.W.2d 520 (Court of Appeals of Texas, 1966)
Kokernot v. Caldwell
231 S.W.2d 528 (Court of Appeals of Texas, 1950)
Plainsman Trading Co. v. Crews
898 S.W.2d 786 (Texas Supreme Court, 1995)
Waters v. Ellis
312 S.W.2d 231 (Texas Supreme Court, 1958)
Averyt v. Grande, Inc.
717 S.W.2d 891 (Texas Supreme Court, 1986)
Homer Merriman v. Xto Energy, Inc.
407 S.W.3d 244 (Texas Supreme Court, 2013)
in Re the Office of the Attorney General of Texas
456 S.W.3d 153 (Texas Supreme Court, 2015)
Loomis v. Cobb
159 S.W. 305 (Court of Appeals of Texas, 1913)
Wintermann v. McDonald
102 S.W.2d 167 (Texas Supreme Court, 1937)